European Market Overview and What to Expect

by: TradingHelpDesk

Previous session overview
The euro and dollar fell against the yen in Asia Thursday as weak regional share markets prompted players to sell those currencies for the safe-haven yen.

In early afternoon trading, Japan's benchmark Nikkei 225 Stock Average was down 1.82%, while China's benchmark Shanghai Composite was off 0.42%. Those falls were large enough to encourage short-term investors to trim holdings of riskier assets such as the euro in favor of the yen, traders said.

The dollar stood at JPY93.70 compared to JPY94.13 late Wednesday in Tokyo. The euro traded at JPY133.47 compared to JPY134.09, having tripped stop-loss selling orders around JPY133.80 in the morning session, dealers said.

Other higher-yielding, riskier currencies also fell against the Japanese unit. The British pound was at JPY152.08 compared to JPY152.98 late Wednesday in New York. In the morning the currency touched an intraday low of JPY151.72, its lowest level since July 14.

Though higher-yielding currencies like the euro usually benefit from strong U.S. data, the dollar gained against the euro in New York Wednesday after reports showed sales of new single-family homes in July increased by 9.6%, well above projections for a 1.6% gain.

The British pound fell sharply against the dollar as traders bet that the UK's economic recovery will lag behind that of the 16-nation Euro zone.

Another round of China jitters and cheaper commodity prices crimped the Australian dollar Thursday before further signs of the economy's resilience added good support in anticipation of robust growth numbers next week.

Market expectation
Foreign exchange markets are shying away from the risk-sensitive euro as the Japanese stock market weakens Thursday.

Dealers said that into next week, the yen may continue gaining against its rivals if global share markets remain sluggish.

Dealers suggest that speculative selling pressure could hit the pound across the board if the technical outlook crumbles.